Wealth Opportunities in Commercial Real Estate: Management, Financing, and Marketing of Investment Properties

Gross Income

Gross income is money received by the landlord from any source whatsoever, including rents received and interest income. Gross income also includes miscellaneous revenues such as income earned from late charges, vending machines, laundry machines and services, and from storage rentals. It also would include revenue earned from employee services for work performed for tenants, provided the work is within the scope of the employee's duties. Additional sources of income for the owner might include parking revenue, lockers, directories, remetered utilities, long-distance telephone revenue, equipment rental, cell-tower site income, advertising revenue, such as monies derived from billboard and monument advertisements, and so on. Gross income would also include nonrecurring income such as monies received for a lease termination fee or the landlord's participation in rentals over a tenant's contractual rent in the event of sublease or assignment.

In our discussion we will assume that we are evaluating a leased-fee estate. It is primarily the income from tenant leases that composes the gross income. Does the gross income change if the tenant is hugely profitable or has a bad year? The answer, in general, is no, because the landlord does not benefit or suffer from the tenant's operations. The landlord receives the contractual rent regardless of the ups and downs of the tenant's business. However, there are exceptions to this rule.

First of all, the lease may specify that the ...